While many companies have been successful with their efforts to manage vendors through the changing business conditions, others have struggled to keep them performing in an acceptable manner. Why the disparity? Many people perceive supply chain management to be something associated with manufacturing companies, when in fact aspects of it apply to nearly all organizations. There are many techniques that can be used to manage vendors, but the ones that appear to be working are those that foster collaboration as opposed to the “big stick” approach. So how do you ensure a win-win contract is put in place? What should be included in order for the relationship between the customer and vendor to be mutually beneficial?

Specifications
The more detailed the specifications, the greater the likelihood that the outcome will be correct. Companies that provide the necessary information are typically the ones that have successful relationships with their suppliers.

Packaging/Shipping
Carton quantities, carton weight, packaging material, skid quantities, skid dimensions, and other packaging requirements are critical for the customer to avoid pitfalls in their internal systems once the parts are received. Shipping methods, paperwork, schedules, shipping quantities, and other elements are necessary to ensure goods get from dock to dock without errors and at the scheduled delivery time.

Forecast/Order Quantities
In today’s world, everyone is trying to minimize inventory exposure; the best way to do this is (1) to align the inventory plan with demand, and (2) to constantly review and analyze demand data at all levels of the supply chain, including the customer level. Companies that strategically share demand data with the supply base have a competitive advantage over the ones that do it the traditional way — one order at a time.

Expectations
Win-win contracts establish solid expectations for both parties concerning the things that will determine a successful outcome. It’s okay to talk about the things that are “sacred” and the things that are flexible when negotiating a contract. Communication is key; failure to do so effectively often results in a contract that’s unsatisfactory to both parties.

Metrics
Agree on what will be measured, how it will be measured, how often it will be reported, and what the data will be used for. It’s crucial to evaluate how everyone is doing.

Periodic Performance Review
Regardless of the time frame of the contract, regular feedback is critical to a successful program, regardless of how small or large it is. Make the feedback process part of the agreed-upon criteria to ensure the outcome is as good as it can be.

A Shift in the Right Direction
For some organizations, implementing these steps will require a paradigm shift, but it’s a shift in the right direction. Moreover, they’re very simple to implement! Remember, the key to a successful outcome is driven by the commitment of all parties involved. Only then can you join the ranks of those organizations who’ve achieved successful relationships with their vendors.